TransDigm Group Reports Fiscal 2020 Fourth Quarter Results
Fourth quarter highlights include:
- Net sales of
$1,173 million , down 23.9% from$1,541 million in the prior year's quarter; - Income from continuing operations of
$101 million ; - Earnings per share from continuing operations of
$1.76 ; - EBITDA As Defined margin of 42.4%;
- EBITDA As Defined of
$498 million is down 29.6% from$707 million in the prior year's quarter; - Adjusted earnings per share of
$2.89 , down 48.6% from$5.62 ; and - Strong operating cash flow generation of
$222 million .
Fiscal 2020 highlights include:
- Net sales of
$5,103 million , down 2.3% from$5,223 million in the prior year; - Income from continuing operations of
$653 million ; - Earnings per share from continuing operations of
$8.14 ; - EBITDA As Defined margin of 44.6%;
- EBITDA As Defined of
$2,278 million is down 5.8% from$2,419 million in the prior year; and - Adjusted earnings per share of
$14.47 , down 20.8% from$18.27 .
Fiscal 2021 financial guidance will not be issued at this time.
Quarter-to-Date Results
Net sales for the quarter declined 23.9%, or
Income from continuing operations for the quarter was
Adjusted net income for the quarter decreased 47.5% to
EBITDA for the quarter decreased 40.9% to
"Throughout our fourth fiscal quarter, both passenger demand and air traffic remained depressed due to the COVID-19 pandemic. The pandemic has resulted in governments around the world implementing measures to control the spread of the virus, including quarantines, travel restrictions and other measures. Certain markets have reopened, while others, particularly international markets, remained closed or are enforcing extended quarantines. Despite these headwinds, I am pleased that we were able to sequentially expand our EBITDA As Defined margin to about forty-two and a half percent as a result of careful management of our cost structure," stated Kevin Stein, TransDigm Group's President and Chief Executive Officer.
Year-to-Date Results
Fiscal 2020 net sales declined 2.3%, or
Fiscal 2020 income from continuing operations declined 22.4% to
GAAP earnings per share were reduced in fiscal 2020 and 2019 by
Fiscal 2020 adjusted net income decreased 19.3% to
Fiscal 2020 EBITDA decreased 4.4% to
Please see the attached tables for a reconciliation of income from continuing operations to EBITDA, EBITDA As Defined, and adjusted net income; a reconciliation of net cash provided by operating activities to EBITDA and EBITDA As Defined, and a reconciliation of earnings per share to adjusted earnings per share for the periods discussed in this press release.
Fiscal 2021 Outlook
Given the considerable uncertainty around the extent and duration of business disruptions related to the COVID-19 pandemic, and how that will impact operations, the Company will not provide fiscal year 2021 guidance at this time.
Earnings Conference Call
The call will be archived on the website and available for replay at approximately
About
Non-GAAP Supplemental Information
EBITDA, EBITDA As Defined, EBITDA As Defined Margin, adjusted net income and adjusted earnings per share are non-GAAP financial measures presented in this press release as supplemental disclosures to net income and reported results.
None of EBITDA, EBITDA As Defined, EBITDA As Defined Margin, adjusted net income or adjusted earnings per share is a measurement of financial performance under GAAP and such financial measures should not be considered as an alternative to net income, operating income, earnings per share, cash flows from operating activities or other measures of performance determined in accordance with GAAP. In addition,
Although we use EBITDA and EBITDA As Defined as measures to assess the performance of our business and for the other purposes set forth above, the use of these non-GAAP financial measures as analytical tools has limitations, and you should not consider any of them in isolation, or as a substitute for analysis of our results of operations as reported in accordance with GAAP. Some of these limitations are:
- neither EBITDA nor EBITDA As Defined reflects the significant interest expense, or the cash requirements necessary to service interest payments, on our indebtedness;
- although depreciation and amortization are non-cash charges, the assets being depreciated and amortized will often have to be replaced in the future, and neither EBITDA nor EBITDA As Defined reflects any cash requirements for such replacements;
- the omission of the substantial amortization expense associated with our intangible assets further limits the usefulness of EBITDA and EBITDA As Defined;
- neither EBITDA nor EBITDA As Defined includes the payment of taxes, which is a necessary element of our operations; and
- EBITDA As Defined excludes the cash expense we have incurred to integrate acquired businesses into our operations, which is a necessary element of certain of our acquisitions.
Forward-Looking Statements
Statements in this press release that are not historical facts, including statements under the heading "Fiscal 2021 Outlook," are forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. Words such as "believe," "may," "will," "should," "expect," "intend," "plan," "predict," "anticipate," "estimate," or "continue" and other words and terms of similar meaning may identify forward-looking statements.
All forward-looking statements involve risks and uncertainties that could cause
Contact: |
Investor Relations |
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216-706-2945 |
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CONDENSED CONSOLIDATED STATEMENTS OF INCOME |
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FOR THE THIRTEEN WEEK PERIODS AND FISCAL YEARS ENDED |
Table 1 |
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(Amounts in millions, except per share amounts) |
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(Unaudited) |
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Thirteen Week Periods Ended |
Fiscal Year Ended |
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|
|
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|
$ |
1,173 |
$ |
1,541 |
$ |
5,103 |
$ |
5,223 |
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COST OF SALES |
637 |
659 |
2,456 |
2,414 |
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GROSS PROFIT |
536 |
882 |
2,647 |
2,809 |
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SELLING AND ADMINISTRATIVE EXPENSES |
182 |
212 |
727 |
748 |
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AMORTIZATION OF INTANGIBLE ASSETS |
41 |
55 |
169 |
135 |
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INCOME FROM OPERATIONS |
313 |
615 |
1,751 |
1,926 |
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INTEREST EXPENSE - NET |
267 |
245 |
1,029 |
859 |
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REFINANCING COSTS |
1 |
— |
28 |
3 |
||||||||||||
OTHER (INCOME) EXPENSE |
(31) |
3 |
(46) |
1 |
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INCOME FROM CONTINUING OPERATIONS BEFORE INCOME TAXES |
76 |
367 |
740 |
1,063 |
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INCOME TAX PROVISION |
(25) |
50 |
87 |
222 |
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INCOME FROM CONTINUING OPERATIONS |
101 |
317 |
653 |
841 |
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(LOSS) INCOME FROM DISCONTINUED OPERATIONS, NET OF TAX |
(19) |
31 |
47 |
51 |
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NET INCOME |
82 |
348 |
700 |
892 |
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LESS: NET INCOME ATTRIBUTABLE TO NONCONTROLLING INTERESTS |
— |
(1) |
(1) |
(2) |
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NET INCOME ATTRIBUTABLE TO TD GROUP |
$ |
82 |
$ |
347 |
$ |
699 |
$ |
890 |
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NET INCOME APPLICABLE TO TD GROUP COMMON STOCKHOLDERS |
$ |
82 |
$ |
260 |
$ |
514 |
$ |
779 |
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Earnings per share attributable to |
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Earnings per share from continuing operations - basic and diluted |
$ |
1.76 |
$ |
4.08 |
$ |
8.14 |
$ |
12.94 |
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(Loss) Earnings per share from discontinued operations - basic and diluted |
(0.33) |
0.55 |
0.82 |
0.90 |
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Earnings per share |
$ |
1.43 |
$ |
4.63 |
$ |
8.96 |
$ |
13.84 |
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Cash dividends declared per common share |
$ |
— |
$ |
30.00 |
$ |
32.50 |
$ |
30.00 |
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Weighted-average shares outstanding: |
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Basic and diluted |
57.3 |
56.3 |
57.3 |
56.3 |
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SUPPLEMENTAL INFORMATION - RECONCILIATION OF EBITDA, |
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EBITDA AS DEFINED TO INCOME FROM CONTINUING OPERATIONS |
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FOR THE THIRTEEN WEEK PERIODS AND FISCAL YEARS ENDED |
Table 2 |
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(Amounts in millions, except per share amounts) |
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(Unaudited) |
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Thirteen Week Periods Ended |
Fiscal Year Ended |
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|
|
|
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Income from continuing operations |
$ |
101 |
$ |
317 |
$ |
653 |
$ |
841 |
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Adjustments: |
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Depreciation and amortization expense |
71 |
88 |
283 |
226 |
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Interest expense, net |
267 |
245 |
1,029 |
859 |
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Income tax provision |
(25) |
50 |
87 |
222 |
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EBITDA |
414 |
700 |
2,052 |
2,148 |
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Adjustments: |
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Acquisition-related expenses and adjustments (1) |
13 |
(16) |
31 |
169 |
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Non-cash stock compensation expense (2) |
34 |
23 |
93 |
93 |
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Refinancing costs (3) |
1 |
— |
28 |
3 |
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COVID-19 & 737 MAX restructuring costs (4) |
23 |
— |
54 |
— |
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Other, net (5) |
13 |
— |
20 |
6 |
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Gross Adjustments to EBITDA |
84 |
7 |
226 |
271 |
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EBITDA As Defined |
$ |
498 |
$ |
707 |
$ |
2,278 |
$ |
2,419 |
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EBITDA As Defined, Margin (6) |
42.4 |
% |
45.9 |
% |
44.6 |
% |
46.3 |
% |
(1) |
Represents accounting adjustments to inventory associated with acquisitions of businesses and product lines that were charged to cost of sales when the inventory was sold; costs incurred to integrate acquired businesses and product lines into |
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(2) |
Represents the compensation expense recognized by |
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(3) |
Represents costs expensed related to debt financing activities, including new issuances, extinguishments, refinancings and amendments to existing agreements. |
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(4) |
Represents restructuring costs related to the Company's cost reduction measures in response to the COVID-19 pandemic ( |
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(5) |
Primarily represents foreign currency transaction gains or losses, payroll withholding taxes related to special dividend and dividend equivalent payments and stock option exercises, non-service related pension costs, deferred compensation and gain or loss on sale of fixed assets. |
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(6) |
The EBITDA As Defined margin represents the amount of EBITDA As Defined as a percentage of sales. |
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SUPPLEMENTAL INFORMATION - RECONCILIATION OF |
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REPORTED EARNINGS PER SHARE TO |
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ADJUSTED EARNINGS PER SHARE |
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FOR THE THIRTEEN WEEK PERIODS AND FISCAL YEARS ENDED |
Table 3 |
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(Amounts in millions, except per share amounts) |
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(Unaudited) |
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Thirteen Week Periods Ended |
Fiscal Year Ended |
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Reported Earnings Per Share |
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Income from continuing operations |
$ |
101 |
$ |
317 |
$ |
653 |
$ |
841 |
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Less: Net income attributable to noncontrolling interests |
— |
(2) |
(1) |
(2) |
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Net income from continuing operations attributable to |
101 |
315 |
652 |
839 |
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Less: Special dividends declared or paid on participating securities, including dividend equivalent payments |
— |
(87) |
(185) |
(111) |
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101 |
228 |
467 |
728 |
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(Loss) Income from discontinued operations, net of tax |
(19) |
32 |
47 |
51 |
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Net income applicable to |
$ |
82 |
$ |
260 |
$ |
514 |
$ |
779 |
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Weighted-average shares outstanding under the two-class method |
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Weighted-average common shares outstanding |
54.3 |
53.4 |
53.9 |
53.1 |
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Vested options deemed participating securities |
3.0 |
2.9 |
3.4 |
3.2 |
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Total shares for basic and diluted earnings per share |
57.3 |
56.3 |
57.3 |
56.3 |
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Earnings per share from continuing operations - basic and diluted |
$ |
1.76 |
$ |
4.08 |
$ |
8.14 |
$ |
12.94 |
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(Loss) Earnings per share from discontinued operations - basic and diluted |
(0.33) |
0.55 |
0.82 |
0.90 |
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Earnings per share |
$ |
1.43 |
$ |
4.63 |
$ |
8.96 |
$ |
13.84 |
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Adjusted Earnings Per Share |
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Income from continuing operations |
$ |
101 |
$ |
317 |
$ |
653 |
$ |
841 |
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Gross adjustments to EBITDA |
84 |
7 |
226 |
271 |
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Purchase accounting backlog amortization |
12 |
20 |
53 |
38 |
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Tax adjustment (1) |
(31) |
(28) |
(103) |
(122) |
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Adjusted net income |
$ |
166 |
$ |
316 |
$ |
829 |
$ |
1,028 |
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Adjusted diluted earnings per share under the two-class method |
$ |
2.89 |
$ |
5.62 |
$ |
14.47 |
$ |
18.27 |
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Diluted Earnings Per Share to Adjusted Earnings Per Share |
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Diluted earnings per share from continuing operations |
$ |
1.76 |
$ |
4.08 |
$ |
8.14 |
$ |
12.94 |
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Adjustments to diluted earnings per share: |
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Inclusion of the dividend equivalent payments |
— |
1.54 |
3.22 |
1.97 |
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Acquisition-related expenses |
0.42 |
0.05 |
1.20 |
2.77 |
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Non-cash stock compensation expense |
0.57 |
0.33 |
1.32 |
1.24 |
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Refinancing costs |
0.02 |
— |
0.40 |
0.04 |
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Change in income tax provision due to excess tax benefits on stock compensation |
(0.48) |
(0.40) |
(0.89) |
(0.79) |
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COVID-19 & 737 MAX restructuring costs |
0.39 |
— |
0.76 |
— |
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Other, net |
0.21 |
0.02 |
0.32 |
0.10 |
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Adjusted earnings per share |
$ |
2.89 |
$ |
5.62 |
$ |
14.47 |
$ |
18.27 |
(1) |
For the thirteen week periods and fiscal years ended |
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SUPPLEMENTAL INFORMATION - RECONCILIATION OF |
Table 4 |
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PROVIDED BY OPERATING ACTIVITIES TO EBITDA, |
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EBITDA AS DEFINED |
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FOR THE FISCAL YEAR ENDED |
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(Amounts in millions) |
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(Unaudited) |
||||||||
Fiscal Year Ended |
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|
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Net cash provided by operating activities |
$ |
1,213 |
$ |
1,015 |
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Adjustments: |
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Changes in assets and liabilities, net of effects from acquisitions of businesses |
(99) |
176 |
||||||
Interest expense, net (1) |
996 |
831 |
||||||
Income tax provision - current |
63 |
222 |
||||||
Non-cash stock compensation expense (2) |
(93) |
(93) |
||||||
Refinancing costs (3) |
(28) |
(3) |
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EBITDA |
2,052 |
2,148 |
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Adjustments: |
||||||||
Acquisition-related expenses (4) |
31 |
169 |
||||||
Non-cash stock compensation expense (2) |
93 |
93 |
||||||
Refinancing costs (3) |
28 |
3 |
||||||
COVID-19 & 737 MAX restructuring costs (5) |
54 |
— |
||||||
Other, net (6) |
20 |
6 |
||||||
EBITDA As Defined |
$ |
2,278 |
$ |
2,419 |
(1) |
Represents interest expense excluding the amortization of debt issue costs and premium and discount on debt. |
(2) |
Represents the compensation expense recognized by |
(3) |
Represents costs expensed related to debt financing activities, including new issuances, extinguishments, refinancings and amendments to existing agreements. |
(4) |
Represents accounting adjustments to inventory associated with acquisitions of businesses and product lines that were charged to cost of sales when the inventory was sold; costs incurred to integrate acquired businesses and product lines into |
(5) |
Represents restructuring costs related to the Company's cost reduction measures in response to the COVID-19 pandemic ( |
(6) |
Primarily represents foreign currency transaction gain or loss, payroll withholding taxes related to special dividend and dividend equivalent payments and stock option exercises, non-service related pension costs, deferred compensation and gain or loss on sale of fixed assets. |
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SUPPLEMENTAL INFORMATION - BALANCE SHEET DATA |
Table 5 |
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(Amounts in millions) |
||||||||
(Unaudited) |
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|
|
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Cash and cash equivalents |
$ |
4,717 |
$ |
1,467 |
||||
Trade accounts receivable - net |
720 |
1,068 |
||||||
Inventories - net |
1,283 |
1,233 |
||||||
Current portion of long-term debt |
276 |
80 |
||||||
Short-term borrowings-trade receivable securitization facility |
349 |
350 |
||||||
Accounts payable |
218 |
276 |
||||||
Accrued current liabilities |
773 |
675 |
||||||
Long-term debt |
19,384 |
16,469 |
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|
(3,972) |
(2,894) |
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